Pensions Planning: The NUMBER

bostonerimus

A detailed budget so you can control spending is the "ugly child" of financial planning. So much effort goes into investing when by simply controlling spending you can get better and more immediate returns.
I've always lived frugally and part of my retirement plan was to have paid off the mortgage to minimize my need for income. My budget was £20k and 3 years into retirement I'm actually spending £18k on average. That is covered by a small DB pension and income from a rental property. So I don't actually spend anything from my retirement savings and I'm just letting those compound. I'm 55 and when US and UK state pension checks start I will have a considerable excess of income,

lexington013

20k Tax free from 55 (drawdown plus savings). 34k when DB pension and state pension kickin from 65.

Linton

bostonerimus wrote: »

A detailed budget so you can control spending is the "ugly child" of financial planning. So much effort goes into investing when by simply controlling spending you can get better and more immediate returns.
I've always lived frugally and part of my retirement plan was to have paid off the mortgage to minimize my need for income. My budget was £20k and 3 years into retirement I'm actually spending £18k on average. That is covered by a small DB pension and income from a rental property. So I don't actually spend anything from my retirement savings and I'm just letting those compound. I'm 55 and when US and UK state pension checks start I will have a considerable excess of income,

Being some 9 years further on than you in the process I find the opposite problem to what many fear...

Starting off with pessimistic assumptions and living well within budget the problem now is that the pension pots are steadily increasing in value. That's not what was planned! Significantly de-risking the portfolio will help to some extent though it takes away some of the fun. We will have to learn to see the budget as a target to be attained rather than a cliff edge to be avoided.

bostonerimus

Linton wrote: »

Being some 9 years further on than you in the process I find the opposite problem to what many fear...

Starting off with pessimistic assumptions and living well within budget the problem now is that the pension pots are steadily increasing in value. That's not what was planned! Significantly de-risking the portfolio will help to some extent though it takes away some of the fun. We will have to learn to see the budget as a target to be attained rather than a cliff edge to be avoided.

I look at it from a slightly different perspective. I've decided to take on more risk as I age and the pension pots grow because I don't really need any income from them. My income from my pension and rent is currently $40k and my budget is $30k. I expect to get around $40k from US SS and UK state pension is 12 years time which will leave me with a large excess of income to invest. I'll just have to deal with the "problem" of increasing value. I'll use some for large one off purchases like home improvements and a new car in a few years time, but my goal is to leave substantial assets to my family and a couple of local charities so I'm doing some estate planning.

chiefie

I love it when this strand kicks in again. It's so interesting what people are up to and how they go about it. Thank you all ��

Marine_life

Being only 30 days now from the first stage of retirement (down to one day a week), we've prepared a detailed budget and have been test driving parts of the budget in real life. I think for most people the budget should break down into three components:

- Basic living i.e. all the normal expenses of just continuing to live.
- Discretionary spend (holidays, eating out etc.)
- Capital spend (one-offs like a new car).

In our case the figures now stand at (in EUR) for a couple

Basic spend = €38,000 (that figure might look high as it includes private health insurance which we have to pay where we live.

Discretionary spend = €27,500 which includes two long-haul holidays a year plus various other local European trips and our eating out budget.

Capital costs = €?? not really budgeted yet but I expect around €10,000 per annum which includes car amortisation and household repairs.

So all in all around €75k per annum

Marine_life

bostonerimus wrote: »

So much effort goes into investing when by simply controlling spending you can get better and more immediate returns

I partially agree with that but there's only so much you can do with being frugal (at some point life just becomes miserable!). Actually the best way to an early retirement is to earn more money (maybe easier said than done) but hold your expenses and invest the excess.

bostonerimus

Marine_life wrote: »

Basic spend = €38,000 (that figure might look high as it includes private health insurance which we have to pay where we live.

Living in the US I also have to buy health insurance.That's one retirement cost that UK retirees don't have to worry about........yet. Annual health insurance premiums for early retirees (ie before age 66 when government Medicare insurance starts) can be many thousands of dollars with deductibles that are also many thousands of dollars and the whole insurance market place is uncertain with the attempts to repeal and replace Obamacare. Luckily, I'm a state retiree and so I get state subsidized insurance and only pay $100 per month for excellent coverage.

westv

So is anybody budgetting for a Lamborghini?

fatbeetle

Gatser wrote: »

- ditto - !! Very close to our situation... started with semi retirement 4 years ago but feeling more inclined to seriously increase that LOVELY leisure time from April 2018

Cheers mate, I'd be grateful for any hints, tips and advice you can offer in advance of our big change! :beer: